FedEx Corp, the world's largest cargo airline, is expected to report a third-quarter profit that rose from a year ago but was sideswiped by severe winter weather and spiking fuel costs.

Storms in the United States and Europe and escalating fuel prices drove Memphis, Tennessee-based FedEx last month to slice its profit outlook by 25 cents per share to a range of 70 to 90 cents a share for the quarter ended February 28.

Analysts on average expect earnings of 82 cents a share, excluding items, up from 76 cents a year ago, according to Thomson Reuters I/B/E/S. Revenue is seen rising to $9.6 billion from $8.7 billion.

The company's third quarter includes the peak shipping season, in which it forecast record holiday volume.

More important than the quarter, analysts say, is whether oil prices and Japan's earthquake and nuclear crisis stifle longer-term consumer demand for goods shipped by the No. 2 package delivery company.

FedEx and United Parcel Service are considered economic bellwethers, moving a huge share of shipped packages.

In its trucks and planes, FedEx handles goods equivalent to 4 percent of U.S. gross domestic product and 1.5 percent of global GDP. UPS ships goods equal to 6 percent of the U.S. GDP and 2 percent of global GDP.

I wouldn't be surprised if there was a moderation down in Q4 guidance because of elevated fuel prices, but my view is that it shouldn't matter because investors are looking to fiscal 2012, and 2012 should be a much better year than 2011, said Sterne Agee analyst Jeffrey Kauffman.

The Federal Reserve on Tuesday sounded more upbeat on the U.S. economy, noting gradual improvement in overall labor market conditions. Household spending, and business investment in equipment and software are expanding, the Fed said.

Jefferies & Co, which rates FedEx a buy with a $112 price target for calendar year-end 2011, said we've been impressed with most freight volumes year-to-date despite weather issues and expects FedEx management to reaffirm solid volumes.

FedEx shares fell 2.7 percent on Wednesday to close at $85.28, down more than 3.5 percent from a year earlier, having traded as high as $98.52 in February. The Dow Jones transportation index gained about 13 percent in the past year.

FedEx said in February that oil prices and weather disruptions would also affect the earnings outlook for fiscal 2011, ending in May.

The company in December had boosted its profit outlook to between $5.00 and $5.30 a share, from its prior view of $4.80 to $5.25, on the back of record holiday shipments.

Analysts now look for $4.87 a share for 2011 on average, rising to $6.36 for 2012, according to Thomson Reuters I/B/E/S.

FedEx can recoup much of the rising fuel costs with surcharges, Sterne Agee's Kauffman said. I'm more concerned about what it might do to everybody else's discretionary spending, he said.

He also looks for FedEx to help me understand what this tsunami, nuclear radiation going on in Japan could mean -- how material is it to your shipping operations and how material is it to the aggregate business environment?

Any progress report on January's combination of FedEx Freight and FedEx National LTL (less-than-truckload) operations will be closely watched.

Rival UPS in February reported a fourth-quarter profit that topped estimates and forecast record-high profits in 2011 based on rising volume, price increases and technology that has boosted productivity. It repeated this forecast after FedEx lowered its outlook.

(Editing by Gary Hill)

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